TOUR OPERATOR- MATTER RESTORED BY THE SUPPREME COURT

[C.A. DEV KUMAR KOTHARI]

Relevant links and references:

CCE V Gandhi Travels 2010 -TMI - 75665 (SC)/Appeal No.- 41 of 2010

COMMISSIONER OF C. EX., VADODARA - II Versus GANDHI TRAVELS 2009 -TMI - 32660 / 2009 (13) S.T.R. 597(Guj.), 2009 (91) RLT 742 (Guj.)

COMMISSIONER OF C. EX. & CUS., VADODARA-II Versus GANDHI TRAVELS 2007 -TMI - 1406 - CESTAT, AHMEDABAD / 2007 (6) S.T.R. 430 (Tri. - Ahmd.), 2007 (79) RLT 774 (CESTAT- Ahmd.)

SRI PANDYAN TRAVELS versus COMMISSIONER OF C. EX., CHENNAI-II 2005 -TMI - 125 - HIGH COURT MADRAS/ 2004 (163) E.L.T. 409 (Mad.)

SURESH KUMAR SHARMA V. UNION OF INDIA [2007] 8 STJ 301 (Kar.)

Tour operator:

In commercial and general sense a 'tour operator' is a person who operates and arranges for transport and other facilities for undertaking tours designed by him for any persons from public or a group of public or customers who want to undertake the tour. The tour generally includes visit of several places and arrangements for boarding and lodging when the tour is for many days. Here the itinerary of the tour is preplanned by the tour operator. A tour operator may include in his plans the travel by means of transport provided by him as well as by other agencies. It is not necessary that the tour operator should have his own fleet of vehicles. Tours in case of tour operator can include travel by different modes- rail, road, water and air transport.

Transport provider/ contractor:

On the other hand a person providing transport facility for undertaking travels and other activities as per plans of the passengers is not regarded as a tour operator. For example, a person providing bus and cars for a wedding party (Barat) to go from one place to other, make arrangements for visits of some places at both ends is generally not regarded as a tour operator in general terms by people who use such facilities as well as in the trade circles. The person providing such facilities will be called a transport contractor / bus provider/ car provider etc.

Similarly a person providing bus or car to any other person with or without driver for transportation of persons or group of persons is not considered as a tour operator.

A bus provider for transport of office staff, factory workers or students and staff of school is not regarded as a tour operator.

Old ruling on common parlance or popular sense:

Over 135 years ago in Grenfell Vs. IRC (1876) 1 Ex D 242 - the fundamental concept of common, general and popular meaning was stated by Justice Pollock. Holding that for understanding and interpreting the legislature word in statute should be construed as per the popular sense and not in the strict legal or technical senses."Popular sense" means that which people conversant with the subject matter with which the statute is dealing, would attribute to it. Legislature does not suppose our merchants to be naturalists, geologists, or botanists.

The first part of this rule is still followed by courts generally in interpretation of any law and second part is generally followed for determining tax liability in relation to goods by adopting popular meaning of goods as understood in trade circles.

This test is also applicable in relation to services. A description of service need to be understood in its popular sense and meaning. A mere technical meaning cannot be considered as good idea to decide the taxability of services.

CCE V Gandhi Travels 2010 -TMI - 75665 (SC):

While considering matter of tour Operator Services vis a vis Contract carriage etc. the Supreme Court found it suitable to set aside the order of the High Court and to remit the matter to the High Court for de novo consideration in accordance with law.

In this case we find that the Appellate authority and Tribunal has passed detailed order and followed judgments of Madras High Court. However, they have taken technical issues for prime consideration. There was no argument even before lower authority about the aspect that the service provider was not a 'tour operator' in general sense and was not considered and even acting as 'tour operator' while providing vehicles on hire to other parties. The high Court dismissed appeal of revenue finding no substantial question of law. The high Court also did not dealt with the matter of 'tour', and 'tour operator' in its judgment nor the High Court held that the facts had become final as not challenged as wrong or perverse.

The service provider was not represented. Had there been a counsel for service provider, perhaps he could have highlighted that vehicles provided for normal transportation is not considered as a tour and the service provider did not act as a tour operator, then also it was likely that the Supreme Court could have dismissed the appeal of the revenue.

The judgment of the high Court is reported as COMMISSIONER OF C. EX., VADODARA - II Versus GANDHI TRAVELS 2009 -TMI - 32660 / 2009 (13) S.T.R. 597(Guj.), 2009 (91) RLT 742 (Guj.)

Before the High Court the following questions were referred:

(a) Whether or not the "tour" service provided by the respondent to their clients under contract in vehicles covered by permits granted under Motor Vehicles Act as "contract carriage" will be covered under the definition of the "tour operator" as given under Section 65 (115) of the Finance Act, 1994?

(b) Whether or not, a "contract carriage" constructed or adopted and equipped and maintained in accordance with such specification as may be prescribed in this behalf are "tourist vehicle"?

(c) Whether or not, in view of the facts and circumstances of the case, the Tribunal is justified in holding that the service provided by the respondent is not covered under "tour operator" services?

Mr. Harin P. Raval, learned Assistant Solicitor General appeared for the revenue.

The High Court viewed and considered the matter as follows:

Heard counsel for revenue.

Perused the orders passed by the authorities below.

The adjudicating authority as well as the appellate authorities have discussed the entire issue with regard to four vehicles in respect of which services provided by the respondent to M/s. IPCL & M/s. IFFCO in the subject contracts by utilising any of the said four vehicles.

Finding is given by the appellate authorities that they do not fall within the meaning of 'Tour Operator'.

We do not expand the scope of the present proceedings.

We do not express any opinion as to whether the contract carriage vehicles would fall within the meaning of Tour Operator.

Looking to the facts and circumstances of the case and looking to the finding arrived at by the appellate authorities, we are of the view that no substantial questions of law arises out of the order of the Tribunal.

Therefore the High Court finding only question of fact and no substantial question of law dismissed the appeals.

With due respect the author feels that if the honorable High Court had discussed the issue a little more elaborately and considered the issue that lower authority and Tribunal has given a finding and that finding is not challenged as perverse, and that the service provided does not constitute a 'tour' and that with help of those vehicles the service provider was only providing vehicles and not any service of 'tour operator', a s generally understood, then the Supreme Court might not have restored the matter.

The judgment of the CESTAT is reported as:

COMMISSIONER OF C. EX. & CUS., VADODARA-II Versus GANDHI TRAVELS 2007 -TMI - 1406 - CESTAT, AHMEDABAD / 2007 (6) S.T.R. 430 (Tri. - Ahmd.), 2007 (79) RLT 774 (CESTAT- Ahmd.)

Analysis of facts, contentions, reasoning and decision:

The issue involved in this case is regarding applicability of Service Tax under 'Tour Operator' category to the vehicles operated by the respondent.

The learned Commissioner (Appeals) in his Order-in-Appeal has held that:

 4 vehicles having Registration Nos. GJ6X-9106, GJ6X-9119, GJ6X-9169 and GJ-6X-9140 are not tourist vehicle,

 These vehicles do not fall within the scope of 'tourist Vehicle'

Therefore any operation conducted by these 4 vehicles would not get covered under the category of 'Tour operator' under Section 65(52) of the Finance Act, 1994.

 The Revenue has come up in appeal against these findings.

 Learned SDR submits that:

 the vehicles which are being plied by the respondent would be covered within the definition of tour operator inasmuch that the said vehicles are 'contract carriage' and they are engaged in the business of operating tours between two destinations.

 As per SDR the issue is squarely covered against the respondent by the judgment of the Hon'ble High Court of Madras in the case of Secy. Federn. of Bus Operators Assn. of T.N. v. UOI, reported at 2006 (2) S.T.R. 411 (Mad.) = 2001 (134) E.L.T. 618 (Mad.) and Sri Pandyan Travels v. CCE, Chennai-II reported at 2006 (3) S.T.R. 151 (Mad.) 2004 (163) E.L.T. 409 (Mad.)

 That the learned Commissioner has erred in coming to the conclusion that these 4 vehicles would not get covered under the category of services provided by tour operators.

Contentions on behalf of service provider were as follows:

The Order-in-Appeal is relied on and submitted that the issue has been correctly decided by the learned Commissioner (Appeals).

That the vehicles which are in question were never given a registration as tourist vehicle.

The vehicle cannot be considered as tourist vehicles as defined under Section 65(52) of the Finance Act, 1994 read with Section 2(43) of Motor Vehicles Act read with Rule 128 of Central Motor Vehicles Rules, 1989.

The first and foremost condition is that tour should be operated by a tourist vehicle.

 He submits that case law relied upon by the learned SDR, on the contrary supports his case.

Views of Tribunal:

 We gave anxious hearing to both the sides and considered the submissions made at length by both sides.

 At the outset it has to be decided whether the learned Commissioner (Appeals) was correct in coming to the conclusion that 4 vehicles which are in question are out of the ambit of 'tourist vehicle' or not.

 Section 2(43) of the Motor Vehicles Act, 1988 defines tourist vehicle as under:-

"(43) "tourist vehicle" means a contract carriage constructed or adapted and equipped and maintained in accordance with such specification as may be prescribed in this behalf;"

It can be noticed on careful reading of the above reproduced section that a 'tourist vehicle' has to conform to the specifications given under Rule 128 of Central Motor Vehicles Rules, 1988. The said Rule 128 of Central Motor Vehicles Rules specifies various special conditions as regards dimensions, structures, passenger entrance and exit, emergency doors, windows, driver entry and exit, etc.

From the perusal of the said Rules it is very clear that to get a vehicle registered as tourist vehicle the assessee has to first conform the vehicle to specifications given under Rule 128 of Central Motor Vehicles Rules, 1988.

The respondent had, in fact, produced certificate issued by Vehicle Registering authority i.e. State Transport Authority that 4 vehicles which are in question were covered under Section 2(7) of the Motor Vehicles Act as a 'contract carriage' but they were not covered under Section 2(43) of the Motor Vehicles Act as 'tourist vehicle'.

On such evidence being produced before the Commissioner (Appeals), learned Commissioner (Appeals) has held that these 4 vehicles would fall out of ambit as a 'Tourist Vehicle' and granted relief to the respondents.

The Revenue has not produced any contrary evidence before tribunal to indicate that the vehicles in question are not tourist vehicles.

Referring to the judgments cited by the learned SDR, Tribunal ntoed that Hon'ble High Court of Madras in the case of Secy. Federn. of Bus Operators Assn. of T.N. (supra) in Para 14 has held as under :-

"We have, therefore, no hesitation first to hold that the first and foremost condition for a person to be held as "tour operator" within the meaning of Section 65(52) of the Finance Act is that he must be engaged in the business of operating tours in a "tourist vehicle" in terms of Section 2(43) of the Motor Vehicles Act and in no other type of vehicle and, therefore, necessarily such vehicle must conform to the conditions prescribed under Rule 128 of the Central Motor Vehicles Rules."

The evidence produced before the lower authorities and before tribunal indicate that the respondent is not operating 'tourist vehicles' as per Section 2(43) of Motor Vehicles Act, read with Rule 128 of Central Motor Vehicle Rules.

The judgment relied upon by the learned SDR in the case of Sri Pandyan Travels (supra) would in fact support the respondent's case, as correctly contended by the learned Advocate. We may reproduce the observation of the High Court which is as under:-

"Inasmuch as the petitioner is a contract carriage operator and not a stage carriage operator, the observation of the Division Bench in respect of "spare buses of stage carriages" is not applicable. It is also relevant to refer once again the observation in Para 41 ".... In fact, the most of the petitioners, who are having the contract carriage, are having the permits, under Section 88(9) of the Motor Vehicles Act read with Section 82, which are nothing but tourist "tourist permits" issued for the purpose of promoting the tourism and obviously issued to the tourist. Whereas contemplated under that section. Therefore, there will be no question of entertaining their objections and they will straightaway be covered under Section 65(52) of the Finance Act..."

On the reading of the above reproduced portion of the judgment of the Hon'ble High Court it can be seen that the Hon'ble High Court came to the conclusion based on the fact that the petitioner therein were holding permits under Section 88(9) of the Motor Vehicles Act, read with Section 82. The provisions of Section 88(9) of the Motor Vehicles Act reads as under:-

"(9) Notwithstanding anything contained in sub-section (1) but subject to any rules that may be made by the Central Government under sub-section (14), any State Transport Authority may, for the purpose of promoting tourism, grant permits in respect of tourist vehicles valid for the whole of India, or in such contiguous States not being less than three in number including the State in which the permit is issued as may be specified in such permit in accordance with the choice indicated in the application and the provisions of Sections 73, 74,80,81,82,83,84,85, 86 of sub-section (1) of Section 87 and Section 891 (sic) (89) shall, as for as may be, apply in relation to such permits."

A plain reading of the above sub-section would indicate that tourist permit is granted to an operator if he has, tourist vehicles. Hence the tourist vehicle has to be read in line with the Section 2(43) of Motor Vehicles Act and Rule 128 of Central Motor Vehicles Rules.

Respondent's four vehicles did not answer to the description of 'tourist vehicles'.

The fact in the current case is that the 4 vehicles were never run as 'tourist vehicles', as envisaged under Section 2(43) of Motor Vehicles Act.

Accordingly, considering the facts and circumstances of the case Tribunal held that the learned Commissioner (Appeals) order is correct and does not require any interference.

Thus the Appeal filed by the Revenue was dismissed by Tribunal.

Observations of author:

The Tribunal has held that the four vehicles never run as 'tourist vehicle'. This is a pure finding of fact.

Too technical issues were raised:

It appears that the counsel of service provider raised very technical issue based on provisions of Motor Vehicle Act and regulations of road transport vehicle.

It can be that a contract carriage or stage carriage vehicle can some time be run as tourist vehicles for conducting tour for tourists. Similarly a vehicle permitted to run as 'tourist vehicle' may not necessarily be run as tourist vehicle.

There should be examination on the following lines:

Whether the trip from one place to other place can be considered as a trip of tourist vehilcle?

Whether, there is operation of 'tourist vehicle', as generally understood?

Whether, the operator acted as a 'tour operator' as generally understood?

Whether, the passengers can be considered as tourist, as generally understood?

In view of author when a person hire out or provide vehicles for local transportation of people for residence to factory/ office/ school/ college etc. the answers to all above questions will be negative and the service will not be a service of tour operator.

Suppose a person owns 'tourist vehicle' and operate as 'tour operator' during season of tourists. The services provided in connection with tour to tourists will be covered in expression of 'tourist services' or 'tour operator services'.

However, suppose the same vehicle is also used by hiring to a school during off season. The hiring of vehicle to school for transportation of its staff or students cannot be considered as a service of 'tour operator', because the students and teachers who use the vehicle cannot be called tourist, the trip in city to pickup and drop students and teachers cannot be called a 'tour', the vehicle cannot be considered to have been used as 'tourist vehicle', though it is registered as such.

Simply speaking a person going to office and coming back to home, or a student going to school and coming back to home, or a worker going to factory and coming back to home, cannot be considered to have under taken a 'tour of tourists' or even a 'tour' in common parlance. Therefore, vehicles used to provide transport facility for such trips cannot be considered tourist vehicles and the passengers cannot be considered as 'tourist'.

The author feels that if the counsel of service provider, has made a little more elaborate submissions and Commissioner (Appeal) and Tribunal had also made a little more discussion on realted issues, perhaps the matter would have settled at the first stage itself. In this case if the Commissioner (Appeal) / and / or Tribunal had given finding on factual aspects like tour, tourist, tour operator as understood in common parlance, perhaps the matter would not have gone back to the High Court for a decision afresh. It is hoped that counsels of service provider shall make submission covering all aspects in the fresh round of proceedings before the high Court.

The experience from the decision of the Supreme Court suggests that authorities and courts must make a detailed and speaking order or judgment to avoid restoration of matters.